The Courier-News from Bridgewater, New Jersey • Page 118

C-6 SUNDAY, MAY 3. 1998 YOUR MONEY THE COURIER-NEWS ducation mall tax break beRer than rs on So far, the new Education IRA has leen pretty much a bust Middle-income parents may skip them, in favor of the new education tax credits (see below). Higher-income parents may consider this IRA too small to bother The Strong Funds in Milwaukee, however, say that interest is picking up. With Education IRAs, you can invest up to $500 a year for every child under 18. There's no immediate tax deduction.

But the earnings on your money are entirely tax free, if spent on higher education. The Senate voted last week to raise the annual contribution to $2,000. Last year, the House proposed a limit of $2,500. But these two bills also extend the Education IRA to parents who'll send children to private or parochial elementary and secondary have around $22,500 in 18 years. In 2016, that might cover two-thirds of a year at a public college in your state, which isn't too bad.

Subtracting your contributions, you'd have accumulated $13,500 tax free. If your child is 8 when you start to save, however, you'd accumulate only around $3,800 tax free, not counting contributions. At this point, middle-income people should consider other options. Two new education tax credits are available. But you cannot claim them in any year that you withdraw funds from an Education IRA to help pay for school.

You have to choose between the IRA and the credits. Which one is better? The credits are worth up to $1,500 a year for the child's first two years of school. For each year thereafter, you can claim up to $1,000 ($2,000 starting in 2003). for children under 18. You can put in $500 a year on top of the $2,000 you might invest in a traditional IRA or a Roth IRA.

Grandparents, other relatives, godparents or friends could also establish the IRA. But no more than $500, total, can be invested for each child, each year. If grandma puts in $300, dad can add only $200 more. There's a 6 percent penalty on excess contributions. Typical annual fee: $10 or $15, although the Strong Funds and some others charge zero.

To make a full Education IRA contribution, your adjusted gross income has to be less than $95,000 on a single return or $150,000 on a joint return. Above these limits, the contribution phases out. If you put in the maximum from the time the child is born, and your money earns 10 percent a year, you'll That comes to a total of $5,000 (or for four years of school. The IRA will probably be worth more than that amount, if you start it when the child is born. If you start when your child is 8, however, the tax credits will probably be worth more.

The future is guesswork, but you get the idea: Education IRAs for early and disciplined planners or higher-income people; tax credits for middle-income people who didn't save early. You're fully eligible for the new tax credits if your adjusted gross income is less than $40,000 on a single return or $80,000 on a joint return. Above those limits, the credits phase out. These amounts will rise with inflation, starting in 2002. Back to Education IRAs.

Here are some other possible glitches: You can't fund an IRA in a year you contribute to a state prepaid tuition plan, and some states are offering plans that look pretty attractive. The more the child has in savings, the less financial aid he or she will qualify for. (But this is no reason not to save. Nonsavers get stuck with more student loans.) If the child doesn't go past high school, the IRA can be transferred tax-free to another child. But any money not used by age 30 must be withdrawn and taxed to the child, with a 10 percent penalty.

Education IRAs aren't publicized much, because financial institutions make so little money on them. But you can find them at banks, stockbroker-age firms and mutual-fund groups. Write Jane Bryant Quinn, Washington Post Writer's Group, 1150 15th St. NW, Washington, DC 20071 INVESTORS' MEMO Tracking small company stocks Furniture irm 6s Tit S8H TTT "Nil to stay afloat Ron Freeman, standing, hopes his 'Titanic' line of furniture will have Shores Jr, Classic Leather's president, says the furniture appeals to By PAUL NOWELL The Associated Press HICKORY, N.C. Ron Freeman wasn't munching on popcorn in a darkened movie theater when he came up with the idea to reproduce some pieces of furniture from the ill-fated Titanic.

When the light bulb came on, Classic Leather's marketing director freely admits, he had no idea that "Titanic" would become the biggest blockbuster movie of all time. -II- No, Freeman says, the brainstorm was more deliberate than inspirational. "I was reading a magazine article about the Titanic, which had photos of china used to serve first-class passengers," he said at the small com-; pany's North Carolina headquarters. "I figured if this was what the plates looked like, the decor had to be magnificent." During a stop at the library, Freeman learned the Titanic was bedecked with an eclectic collection furniture ranging from elegant Hepplewhite chairs to practical leather folding chairs. I.

was something that fits right into our business," said Freeman, 30, whose college major was English lit-' erature. "I wish I could say I had a ball, but it really was based on what I read." Jane Bryant Quinn schools. This embroils the IRA in the fight over whether to use the tax code to help children leave the public-school system. President Clinton says he'll veto the proposal. So you're probably still looking at a $500 Education IRA.

Should you use it? I'd say definitely yes, if you're in the right financial situation. Even small tax breaks are better than a kick in the shin. Education IRAs are available only The Titanic sank on its maiden voyage from Southampton, England, to New York on April 14, 1912, with the loss of more than 1,500 of its 2,200 passengers. The historic event has been chronicled by historians in books, at exhibitions and even in a Broadway play. The movie is still drawing crowds while setting new box office records.

Freeman approached company chairman and founder Tom Shores, who loved the idea of reproducing some of the furniture pieces from the ship. Titanic Artifact Collection And last month, Classic Leather introduced more than 20 pieces in its "RMS Titanic Artifact Collection" at the International Home Furnishings Market, a trade show held in High Point. The furniture should be available to consumers by the summer. The collection includes nearly two dozen mahogany pieces, some upholstered in leather, that are copied from the Titanic's first-class staterooms, dining rooms and smoking lounges. They include the Cherbourg settee, a Halifax dressing vanity, gaming tables, beds, corner desks and lounge chairs.

The least expensive piece in the new Collection will retail for about $750, while the most expensive a carved sideboard, will fetch as much as $5,000, Freeman predicted. knows how to get about in Washington, especially when a good, media-covered controversy develops. But better service? The record to date hardly suggests that, unless you consider voice mail serves the customer rather than the seller, or believe an all-purpose formulated letter best addresses your complaint, or that rising fees are justified by the service. "The bigger the bank," says Kenneth Guenther, "the poorer the service." Since he is executive vice president of the Independent Bankers Association of America, a trade group of small banks, Guenther might be forgiven such a sweeping generalization. But he has a point.

The point is expressed also by Paul A. Schosberg, president of America's Community Bankers, a trade group provides educational material and other benefits to 36,500 clubs nationwide, reaching more than 670,000 investors. And even among affiliated clubs, 22 percent dissolve in the first two years, said Robert O'Hara, vice president of the NAIC. Still, the average association-related club is about 8 years old, and last year more than 900 clubs were 20 or older and 40 were more than 40 years old, the association said. 40th Anniversary Camaraderie, as well as good investments, are behind the success of Pyramid Trust a Louisville club that will observe its 40th anniversary in May.

The club started in 1958 with about 33 acquaintances, mainly businessmen, and today has 37 members, said Oscar Wright one of four charter members still in the club. "We've done extremely well over the years," said Wright, adding that key factors include having good busi-nesspeople who made sensible investment decisions. Among its big winners: General Electric, Procter Gamble and Walgreen. Wright said a club can benefit from having an adviser, such as a stockbroker, but not one who uses a club to get business. "He should be a member of the club and take an active role, but not direct the club," he said.

amine oes bigness serve the customer better? I I i Associated Press photo the success of the movie. Tom the desire for elegant living. chair from the RMS Titanic collection was test-marketed last year through J. Peterman Gift Book. The chair sold for $795.

Without providing sales results, he said the chair has become a very popular seller in the catalog. Classic Leather has been in business since 1966 but until now it has rarely been mentioned in the popular press. That changed with the Titanic line. 1 it "With this line of period furniture, we are appealing to the dramatic in people and their desire for elegant living," said Tom Shores the company's president. plies to physicians.

The industry at the time was rigid, lacking creativity and often providing terrible service. Kelly edged his way in by providing what the bigger companies couldn't: Service. PSSWorld Medical is now international. Its sales will reach about $1.3 billion this year. Kelly tells his story in a just released book, "Faster Company." Unmatched service, he says, gave him a foot in the door.

Continued improvements in service eventually overwhelmed older competitor companies, which Kelly bought out. His philosophy is profoundly simple: "A business is people working together to deliver value." With all the business niches opening up these days, his book is bound to be a bestseller. To learn more Where to learn more about investment clubs: More information about investment clubs is available from The National Association of Investors www.better-investing.org), which caters to individuals and clubs with such benefits as a magazine and books, financial reports, study guides and local investor fairs. "Taking Control of Your Financial Future. Making Smart Decisions with Stocks and Mutual Funds," by Thomas E.

O'Hara, NAIC founder. (McGraw Hill) gy. Here are the basic investing principles of the National Association of Investors Corp: Invest regularly, over the long term, regardless of market conditions. Reinvest all earnings, dividends and capital gains. Buy growth stocks companies whose sales and earnings are growing faster than similar companies in their industry, and with good prospects of being worth more five years later.

Diversify by investing in different-sized companies in different industries. kA i Even before the first sale, Classic Leather has gotten a lot of publicity about the new line. Sight unseen, major retailers have committed to putting the Titanic line in their showrooms, Freeman said. Company officials declined to name any retailers that will carry the line before the High Point market because the company is negotiating over distribution rights, they said. But Classic Leather executives are so Confident about the furniture's potential that they are planning to double the size of the collection by the fall market.

Freeman said a leather folding Niches have opened all over the country. Almost inevitably, airline mergers leave opportunities for smaller lines. Mergers in book publishing, combined with spreading technology, have left huge openings for small, specialty publishers. Some agents complain that the big publishers only are interested in the next best-seller, preferably with a sex-and-action formula. As a result, marketing space has opened for the low-overhead, creative niche publishers.

They have sprung up all over the countryThey serve readers. Service sells, and small can deliver service that big cannot. A graphic example of the concept is provided by Patrick Kelly, who 15 years ago mortgaged his home to create PSSWorld Medical, a distributor of medical sup ing commissions for buying stocks. "A lot of clubs look at their returns after one year and see they invested $400 and it's now worth $380, and ask, 'Why am I doing It's disillusioning. "The way to get rich is slowly.

Look at what you're building, rather than worry about the dollar amount of your account." Another way to ensure success, he said, is to make sure members have the same investment philosophy. "A difference in investment philosophy can lead to friction," he said. "Some people are not happy accumulating shares; they want more moving in and out of the market. "You need to go over the principles of the club so members are on the same line." Here are some other tips to help keep a club together: Keep interest high. Don't let one or two club members do all the work and research.

Get everybody involved. Provide ongoing education. Sponsor workshops and seminars on investing, with guest speakers ranging from stockbrokers to portfolio managers. Socialize. Some clubs have an annual banquet that includes spouses.

Others use part of their profits to go on trips. Invest wisely. Perhaps nothing can help a club survive more than its own financial success, which means having a winning investment strate- By JOHN CUNNIFF The Associate Press NEW YORK Those big mergers' that are making all the headlines in finance, airlines and publishing, for example are designed to serve you, the consumer, with a greater variety of products and higher quality? Well, that's one reason offered by prospective mergees. They see it as essential to place themselves on the side of consumers who, even the biggest banks can't forget, provide a multibillion-dollar flow of credit-'card accounts, checking fees and home mortgages. And who, it can't be forgotten, have tendency to write to their con-gressman or Ralph Nader or a self-appointed consumer group that By JIM LAWLESS Gannett News Service The announcement last month by Utilx a Washington-based fixer of underground utility cables, was an investor's worst nightmare.

Crummy weather had turned a potentially super quarter into a loser and its largest customer was going off the books. The double dose has shriveled the company's common stock price to $5.38 a share on the Nasdaq market, down more than a buck a share from where it was when New Jersey small company-stock researcher Kenneth Kamen recommended it to clients last December. Kamen fired off an update report on Utilx in mid-April, telling clients he still rates the stock a buy for a target price of $9 to $12 a share in 12 to 15 months. "You have to understand the company and its business," Kamen said in an interview. "They lost the business in the fourth quarter, but it is business that will still be waiting for them when the ground dries out." N.J.

cheese company While we were on his favorite subject, Kamen highlighted another of his small-company picks Suprema Specialties a New Jersey cheese company that was recently trading at less than $4 a share on the Nasdaq market. He thinks it'll be worth $12 in 18 to 24 months. Kamen, co-founder and head of research at Princeton Securities of Princeton is convinced that individuals can do more to shape their own investment fate. When it comes to home study, small-company stocks are a much easier read than, say, an IBM or a General Electric that are complex, and have "many seemingly unrelated factors that affect the price of their stock," Kamen said. With smaller companies ypu can focus on their operations and get a clear perception of their value and growth potential.

"Balance your own checkbook? Then you know the difference between debits and credits. It's just business 101," Kamen said. Before investing in a company, ask for several annual reports and 10-K reports. Read and compare the section called "management's discussion and analysis." It can give you a good sense of how management expects to build the company and increase its profitability, and if they succeeded in meeting goals promised in previous years. "This discussion should provide a compelling reason to buy the stock.

Otherwise, look elsewhere," he said. Compelling reasons to buy Utilx according to Kamen, include the company's unique, proprietary restoration treatment, called Cable-Cure and a state-of-the-art, trench-less digging technology called Flow-Mole that provide significant competitive advantages in servicing the large inventory of deteriorating underground cables in the utilities industry. El Nino stole business Utilx had a pile of business washed away by El Nino rains in Southeastern United States and the company said it expects to report a "significant" loss for its fourth quarter of fiscal 1998 ended March 31. At the same time, the company said it terminated its agreement with Washington Gas because the contract would not have been profitable going forward. The contract represented 10 percent of Utilx's total revenues.

Kamen's take on all of this bad news is that the company's fundamentals have not changed, "they were just delayed by 'El If you have questions about investing or personal finance, write to Jim Lawless at the Des Moines Register, P.O. Box 957, Des Moines, Iowa, 50304, or via e-mail at lawlLZs3dmre.dmreg.c0m. Selected questions will be answered in later columns. To ensure the authenticity of the pieces, Classic Leather collaborated with RMS Titanic based in New York, which owns the rights to objects salvaged from the ship. "It was important to everyone from our end that we select a manufacturer who would not compromise the historical and design integrity of the furnishings from the Titanic," said George Tulloch, president of RMS Titanic, which will receive royalties from the Classic Leather also consulted with historians John P.

Eaton and Charles A. Haas to authenticate each piece in the collection. for thrifts. "We're here, we're strong, we're profitable," he says. And significantly, "we're part of the fabric of your city or county, we're local people with local knowledge." Internationl demand There's an argument for bigness, of course.

International business demands it. Outlets on an international scale can provide consumer convenience in a mobile society. The merged operation saves money. It can create provide a cafeteria of financial products. But in an electronic, technological, innovative society the smaller banks also can offer a great deal of product variety, by themselves and in alliances with larger entities.

And they can provide personal service. No wonder they see a niche opening up. Join the club The number of investment clubs, which enable individuals to become investors for as little as $15 a month, has soared along with the bull market in stocks. The first two years can be trying, with a 22 percent dropout rate of clubs set up through the non profit National Association of Investors Corp. But the average age of NAIC clubs is eight years.

Number of clubs 1998 12 1997 mm 1996 Z3 36,500 331,828 125,409 1995 CZ316'054 10.033 1991 7,360 1990 07.085 Source: NAIC Camaraderie, stock choices key for investment club By KEN BERZOF Gannett News Service What are the secret ingredients to making an investment club survive for many years? Camaraderie is high on the list, said Doris Hohn, a 15-year member of the Better Times Investment Club in Louisville, which is celebrating its 25th year. The club started out with six oi ueiKnap, a naraware 1 1 distributor that went out of business Z'ia 1986. "It was just something they wanted to do, to socialize after work," saw nuiin. wuu useu iu ueau rein- nap's credit union. "The club had a way of reaffirming their ment to each other." The club still meets monthly and toBelRnap.

And the club is ahead financially, with a portfolio of about 10 stocks. Winners include Atria Communities, Banc One, Mid-America Bancorp and I Pepsi. ini ii I. I i 11 i uere uuuuiig mm: a guuu uuu 'market to keep an investment club going strong. But bull markets don't last forev-; er, and neither do many clubs.

"The first two years are really crit-- ical," said Kenneth Janke, president and chief executive officer of the "National Association of Investors -Corp. The Michigan-based association Laurie Triefeldt, Gannett News Service Janke said, "The main secret to making a club last is to take a long-term approach. Don't try to time the market." One difficulty among new clubs, Janke said, is start-up costs, includ- :1 6.